Success not enough to keep Dick Smith stockist from staying open

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For Craig and Tracy Smith, success seems to have been their own worst enemy.

After several years operating on the South Coast as resellers for Dick Smith Electronics, the Smiths were invited to open a new Dick Smith store in Bowral in 2001.

But when the contract came up for renewal this month, the Woolworths-owned electronics chain told the husband and wife that, despite building up the business and meeting all of Dick Smith's performance hurdles, they were no longer needed.

"They wanted us to fly the flag for another 18 months and then step aside for them to operate a company store," said Mr Smith, who instead chose to terminate his relationship with the chain and rebadge his store under a competitor's banner.

"Dick Smith had told me they would advertise in regional NSW where they don't have stores, for new stockists [resellers].

"Those people need to know that ... when they become successful they are ripe for the picking."

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The Smiths are among 30 former top-performing Dick Smith and Tandy resellers, many of them in regional NSW, who have left the Woolworths-owned chains to sign with independent retail buying group Leading Edge. Some of them will soon face competition from new Dick Smith company stores.

They suspect Dick Smith is replacing its top resellers with company stores to boost its sales and they are angry they have not be compensated for the goodwill they have built up.

The executive director of the Australian Franchisees Association, Tony Fraser said resellers and franchisees had little protection under the law.

"Issues such as whom good will resides with remain undecided," Mr Fraser said.

The chief executive officer of Woolworths, Roger Corbett, yesterday rejected claims Dick Smith was picking the eyes out of the stockist stores.

"Stockists entered these agreements knowing it was a finite arrangement," Mr Corbett said.

He said Dick Smith decided to replace stockists with company stores, often in new developments in growing markets, so it could provide customers with a wider range of electronic goods.

Not all resellers are choosing to remain in the business. In Port Macquarie, Ken Welsh used his $100,000 superannuation entitlement to buy a Dick Smith business in 1999. After taking turnover from $400,000 to $1.5 million in less than four years, and being named independent operator of the year in 2002, Mr Welsh and his wife, Wendy, were warned by Dick Smith last year their contract would not be extended beyond June.

"It's a very hard situation for us. We have just been forced to shrug our shoulders and walk away," said Mr Welsh.

He cancelled his contract three months early to avoid entering a long lease on his premises. "We didn't get into [the business] to form a charity; we went into it to set ourselves up for the future."